Snap insists TikTok is a 'friend' after posting strong user and revenue growth

Snapchat added seven million daily active users last quarter to reach 210 million – up 24 million (13%) year on year.

The social media platform posted user growth in all regions, with five million of the new users in the three months to 30 September coming from "rest of the world", which comprises all markets outside North America and Europe.

In North America and Europe, Snapchat gained a million users in the third quarter. Snapchat’s user growth has rebounded this year after fixing problems with its app on Android devices.

Snapchat chief executive Evan Spiegel said the platform benefited from growth in users posting and viewing stories. This is notable as Stories’ growth has been negatively impacted in the past two years since rival Instagram cloned the format with Instagram Stories. Snapchat's Stories viewership is very important to the total number of ad views on Snapchat.

The company's revenue is up 50% year on year to $446.2m. It added just five full-time employees globally from the third quarter of 2018 to reach 2,908.

Net loss improved to $227.4m from $255.2m last quarter. The loss is down $98m compared with the same period in 2018.

Discover, another important element of the platform, grew 40% year on year in terms of users’ total time spent watching. More than 100 Discover channels had more than 10 million viewers per month in the quarter, signalling that the channel’s growth was not just driven by a few hits. Instagram is trying to become more competitive as a platform for chat with its new Threads app, which is designed to be used between close friends.

Snap said users opened the app 30 times a day, up from 25 times a day in July 2018.

Threat of TikTok looms

During a call with investors following the earnings release, Spiegel insisted that rival TikTok is a "friend" of Snapchat, when asked why it allows TikTok to advertise on its plaform.

TikTok, which is developing a European headquarters in London and rolling out more mature ad platforms, held its first upfront in the UK earlier this month with the Internet Advertising Bureau.

EMarketer principal analyst Debra Aho Williamson said: "Snap appears to be back on track this quarter. Its revenue beat [expectations] and the seven million increase in daily active users puts the company in a strong position heading into the all-important Q4.

"Competition from upstart social platform TikTok is still looming, however, and it could lead to lower engagement for Snapchat in the future, because both platforms target the youth audience."

Yuval Ben-Itzhak, chief executive of Socialbakers, also warned: "There was a time when Snap was considered indispensable for reaching this younger market. But, today, in addition to the ongoing threat from Instagram, many marketers see TikTok as the most relevant platform for reaching teens and young adults.

"Until now, monetisation has been the challenge for TikTok, but the platform has stated that it is exploring opportunities to create value for brands. By the same token, more and more brands are expressing an interest in exploring advertising on TikTok. This means Snap needs to make sure it stays focused on offering real value to both users and advertisers if it is to keep its appeal for brands."